IRAs and Medicaid

When it comes to IRAs and Medicaid eligibility the question that gets asked is, “How does my IRA affect my eligibility for Medicaid?”

Many states share similar guidelines when it comes to exempt and non-exempt assets in IRAs. Essentially, it boils down to this: if the IRA is not in payout status (the IRA owner is not taking required minimum distributions) then the assets in the IRA are included (non-exempt) in the determination of eligibility. However, if the IRA is in payout status and the owner is now taking required minimum distributions (RMDs) the total amount of the IRA is not included, but the annual income from the RMDs is.The same would be true regarding 401(k)s, 403(b), and other qualified plans that may require RMDs after age 70 ½.

There are some states (Illinois for example) that treat IRAs, a 401(k), and pensions as exempt. Check your state’s laws to see where you fit in.

Another asset that works similarly is an annuity. Like the IRA, if an individual owns and annuity and it is not in payout status (it hasn’t been annuitized), the entire account balance is deemed non-exempt and it is considered an includible asset. If the annuity has been annuitized and is now rendering a steady stream of guaranteed payments, then the annuity balance is not included, but the annual income from the annuity payments is.

The inheritance could potentially affect the recipient’s Medicaid eligibility. He or she would want to spend it down quickly (i.e. paying the nursing home for that month, etc.) and then consider consulting with an attorney on how to effectively remove the money from their possession and regain Medicaid eligibility.

Queuing Waterfowl

In case you hadn't already noticed, this blog doesn't have much to do with ducks - or any waterfowl for that matter.

No, what we're doing here is talking about all things financial; getting your financial house in order. Here in the Midwest, "getting your ducks in a row" implies organization, which is one of the outcomes of having a better understanding of your financial life.

I hope you find the answers you're looking for among the articles here, and perhaps a smile. If you can't locate your answer, drop me an email or give me a call - we'll see what we can find for you.

And if you've come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed "advisor's advisor".

Subscribe to this blog by Email!You'll get a personal email every time a new article is posted - and your email will never be used for anything else without your permission.

IRS
CIRCULAR 230 NOTICE: To ensure
compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).

Not Finding Your Answer?

Or maybe your situation is very unique and you just want some more clarification. Submit your question below and I'll either try to work in your answer in a future article, or I will get back in touch with you directly.

Name:

Email:

Comment or Question:

I know, I hate these things too, but the spammers have forced me to use one.